Legislature(1999 - 2000)
02/25/1999 01:38 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE February 25, 1999 1:38 P.M. MEMBERS PRESENT Senator Jerry Mackie, Chairman Senator Tim Kelly, Vice Chairman Senator Dave Donley Senator Loren Leman MEMBERS ABSENT Senator Lyman Hoffman COMMITTEE CALENDAR SENATE BILL NO. 29 "An Act relating to licensure of physicians; and providing for an effective date." -MOVED CSSB 29(L&C) OUT OF COMMITTEE SENATE BILL NO. 54 "An Act relating to an exemption from and deferral of payment on municipal taxes on deteriorated property; and providing for an effective date." -MOVED CSSB 54(L&C) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 29 - See Labor & Commerce Committee minutes dated 2/11/99. SB 54 - See Labor and Commerce minutes dated 2/11/99. WITNESS REGISTER Mr. Mark Hodgins, Staff Senator Jerry Ward State Capitol Bldg. Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 29 for sponsor. Ms. Catherine Reardon, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, AK 99811-0806 POSITION STATEMENT: Supported SB 29. Mr. Doug Salik, Staff Senator Tim Kelly State Capitol Bldg. Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 54 for the sponsor. Mr. Mark Marlow 2600 Railroad Dr. Anchorage, AK 99501 POSITION STATEMENT: Supported SB 54. Mr. Steven Van Sant, State Assessor Department of Community and Regional Affairs 333 W 4th, Ste 220 Anchorage, Ak 99501 POSITION STATEMENT: Commented on SB 54. Mr. Charles Wohlforth, Member Anchorage Assembly Anchorage, AK 99501 POSITION STATEMENT: Supported SB 54. Mr. Pat Carlson, Borough Assessor Kodiak Island Borough 710 Mill Bay Rd. Kodiak, AK 99615 POSITION STATEMENT: Supported SB 54. ACTION NARRATIVE TAPE 99-5, SIDE A Number 001 SB 29-REQUIREMENTS FOR PHYSICIAN'S LICENSE CHAIRMAN MACKIE called the Senate Labor and Commerce Committee meeting to order at 2:38 p.m. and announced SB 29 to be up for consideration. MR. MARK HODGINS, staff to Senator Ward, sponsor of SB 29, said at the end of the last meeting there was some opposition concerning the time period for training American physicians. So, he took out references to American and Canadian physicians' training and kept the requirements for foreign physicians. The Medical Board continues to support this change. SENATOR LEMAN moved to adopt Lauterbach draft LS0270\H, dated 2/11/99. There were no objections and it was so ordered. MR. HODGINS explained that the CS changes the requirements for foreign physicians to practice in the State of Alaska. It requires a three-year term that can be either an internship, a residency, or to satisfactory performance of the duties and functions of an intern/resident. A candidate must submit documentation to the program which has to be approved by the American Board of Medical Specialists. One other change is the citizen language, "citizen of the United States or lawfully residing in the United States" and the deletion of the phrase, "admitted for permanent residence". SENATOR MACKIE asked if this change was one of the three things the committee was originally trying to accomplish. MR. HODGINS answered yes, this is one of the suggestions from the Medical Board. There was a lot of opposition to this bill, because the Board had not educated people. Therefore, they removed the more controversial portions. Basically, he repeated, CSSB 29 increases the time limit from one year to three years for a foreign applicant to satisfactorily perform the duties of resident physician or intern at a recognized hospital. The time increase is because of a variety of different foreign curriculums across the world. Three years gives the Medical Board a good feeling that the doctor has learned what is adequate for residents of the State of Alaska. CHAIRMAN MACKIE asked if there was currently a shortage of locally trained doctors and if there was a need for foreign doctors now. MR. HODGINS replied that there is a need for certain specialists, not necessarily general practitioners. The Medical Board supports this. CHAIRMAN MACKIE asked if other states allow the same thing. MR. HODGINS replied in other states licensure of immigrating doctors requires from one year to three years. A majority of states require two years and above. Alaska would be requiring the most time. Nine states require one year, 16 states require two years, and 29 states require three years. CHAIRMAN MACKIE asked if we are the only state that doesn't allow licensure of foreign doctors right now. MR. HODGINS replied that all states allow foreign doctors; only the residency requirements differ. CHAIRMAN MACKIE asked if this bill does more than make the requirements more stringent. MR. HODGINS said that's all it does and added that it corresponds with the Immigration Act of 1996 which changes the classification of visa to H1B visa, a three year requirement. SENATOR LEMAN asked what other states do for non-foreign medical graduates regarding citizenship. Currently, you must be a citizen of the U.S. or be admitted for permanent residence. The proposal is to change that to "being a citizen" or to be "lawfully residing." MR. HODGINS responded that to be lawfully residing a person must possess a H1B visa which he thought would bring us into conformance with federal law and with what other states are doing. SENATOR LEMAN questioned the requirements in sections 1 and 2 for non-foreign and foreign medical graduates which don't have corresponding provisions for citizenship. MR. HODGINS explained that language on page 2, line 9, Section 1, paragraph 5, "be a citizen of the United States or lawfully residing in the United States" covers the immigration status. MS. CATHERINE REARDON, Director, Division of Occupational Licensing, said the division provides staff support to the Medical Board and supports the changes in the most recent committee substitute. She said there are two separate issues: can you get a license if you don't have a green card, but you do have another visa you would be working under in the United States; and, if you went to school outside the country, regardless of your citizenship status, should you be required to have additional years of training in the U.S. She believed the State would not be out of compliance with any federal law by leaving things as they are, but the Medical Board and the department support changing them for public policy reasons. MS. REARDON believed there are no other states requiring U.S. citizenship for a medical license. One other Alaska licensing program requires U.S. citizenship, marine pilotage, which also requires a U.S. Coast Guard license requiring citizenship. Ideally, the State would like to remove the issue from the statute altogether, but if it remains in law, it is an improvement to say "or lawfully resides." There are doctors in Alaska right now working for the federal government and they don't need a state license although they can't work outside of their federal jobs or switch jobs. While there is not a large number of these doctors, she suspected this is what created the issue. The Board did not expect this to be a very controversial topic, so it did not highlight it in their January newsletter. The Board did, however, ask for changes in training requirements. MS. REARDON said that the Department of Law also suggested that, when things like this have been contested in other states, the courts ruled the federal government, not the state government should determine who can work. The issue of training foreign medical graduates is a separate topic, because some of them could be U.S. citizens. They could be Americans who intentionally went outside the U.S. to get their medical training. The Board's figures indicate 43 other states require three years of training. MS. REARDON said initially, the Board thought there wasn't much concern about this issue because of the poor response to the newsletter. Now they are more aware of the issue and working on it. SENATOR LEMAN moved to pass CSSB29(L&C) with the accompanying zero fiscal note from committee with individual recommendations. There were no objections and it was so ordered. SB 54-MUNICIPAL TAXES ON DETERIORATED PROPERTY CHAIRMAN MACKIE announced SB 54 to be up for consideration. SENATOR TIM KELLY, sponsor, noted that the companion bill to SB 54 moved out of the House State Affairs committee this morning with some amendment language that he was proposing for this bill. MR. DOUG SALIK, staff to Senator Tim Kelly, explained that the first amendment on page l, line 13 is a verbiage correction. It deletes "only" and replaces it with "any". Page 1, line 14, to delete "attributable to that part" and page 2, line 1, to delete "and the deferral attributed to that part ends" go together. Mr. Van Sant and Mr. Pat Carlson, both state assessors, made those suggestions. SENATOR KELLY moved to adopt amendment #1. There were no objections and it was so ordered. MR. SALIK said he believed there were other concerns about the bill, but he would let Mr. Marlow address them. Number 311 MR. MARK MARLOW, Alaskan electrician, supported SB 54. He presented the committee with a rendering of the building utilizing this law. He said permit fees had been paid this past Monday and he hoped they could start work this summer. MR. MARLOW said the McKay building isn't the only building that would use this law, but it has served the purpose in other states, especially in the older parts of the country. As older buildings become obsolete and dysfunctional, this law could be used to provide incentive to revitalize an area or building so that it is useful and producing taxes, and not causing a blight on the community. CHAIRMAN MACKIE asked what relationship Mr. Marlow had to the project. MR. MARLOW answered that he is redeveloping the building as an apartment house. SENATOR KELLY asked if the building was going to be the same as shown in the picture, with more glass. MR. MARLOW explained that the building would be insulated from the outside, because the fluid nature of concrete causes movement with temperature changes. The core of the building will stay a constant temperature, but the outside of the building actually creeps about two inches up and down between winter and summer, creating cracks in the sheetrock. Insulating the outside of the building will keep the whole building the same temperature, helping to preserve the interior of the building. SENATOR DONLEY said that people in Anchorage are excited about this project, but his questions concern accountability over what has happened with the building over the last 10 years. He asked Mr. Marlow if he owns the building now. MR. MARLOW answered he created a limited liability company that bought the building from the estate of Harvey Sullivan and Duane Hinson, operating as Hinson Associates. SENATOR DONLEY commented that he was probably familiar with the history of the previous owners and the city's struggle with them during which the city probably chalked up hundreds of thousands of dollars worth of legal fees. He asked if the city had been reimbursed for all the legal fees from the previous owners. MR. MARLOW answered that he didn't think so. SENATOR DONLEY asked how much he paid for the building. MR. MARLOW answered about half a million dollars. SENATOR DONLEY asked if he knew what the former owners paid for the building. MR. MARLOW responded that he hadn't seen a record, but heard that they paid $25,000. SENATOR DONLEY said that was his concern. He wanted some accountability for what the community had to go through. MR. MARLOW said he appreciated Senator Donley's concern, but he is not the one who did it. He is offering solutions. SENATOR KELLY asked if this law had been available before, would the former owners have developed the building. MR. MARLOW answered that anything is possible, but that he couldn't speak for the former owners. This type of incentive works well in other parts of the country. Part of the anticipated success of this project at this point is the fact that the statistical vacancy rate for rental housing in downtown Anchorage is zero. A study done by an outside marketing and research firm for the lender indicates that this building, when it's done, will be full in four months. SENATOR DONLEY asked how much would he have been willing to pay for the building without the legislation that was passed. MR. MARLOW answered the amount he paid had more to do with negotiating with the current owners, not the economics of the project. The purchase agreement was made in advance of the passage of this law. Number 400 SENATOR DONLEY asked if the agreement had a clause or any reference to legislation in it on a change of the tax status. MR. MARLOW replied that he wouldn't have completed the purchase until the bill passed, because the project isn't feasible without the legislation. SENATOR DONELY asked what year he negotiated the sale agreement. MR. MARLOW replied last year, after the Governor signed the law. SENATOR DONELY asked in his dealings with the city, had they ever mentioned their past expenses for the building and who is liable. MR. MARLOW answered no; and thought they considered it a cost of doing business. SENATOR DONLEY wished Mr. Marlow good luck. He sees a problem with someone buying a dilapidated piece of property for $25,000, which costs the taxpayers of the city a lot of money over six years, then doing nothing to fix it up, and then selling it to Mr. Marlow for half a million dollars because the legislature passed some favorable special piece of legislation. MR. MARLOW said he understands Senator Donley's frustration, but this law isn't being passed specifically for him. The McKay Building redevelopment will be the recipient of this tool, but as Alaska grows, there will be other buildings. SENATOR KELLY inserted that the law they passed last year was a national statute that had been enacted in other places dealing with dilapidated housing and neighborhoods. They made the law pertain to commercial buildings or multi-family units only, feeling that Alaska didn't have the same kinds of problems. The good news is that there aren't many blighted urban areas in Alaska, but the older we get, the more likely they'll be. SENATOR DONLEY asked if Mr. Marlow hired a lobbyist to work on this last year. MR. MARLOW answered no, and he didn't know of anyone else working on it. SENATOR LEMAN applauded Mr. Marlow's efforts with the building and said his own preference would be to rename the building with its original name, the McKinley Building. MR. MARLOW responded that the new name hadn't been chosen and he assured them that it would have a whole different image - something the whole community could be proud of again. Their projected completion date is late summer of 2000. Number 538 MR. STEVEN VAN SANT, State Assessor, said he agreed with Senator Kelly that if any portion of the property is transferred, any deferred taxes would become immediately due. On page 1, lines 6 and 7 he noted the phrase "beginning on or any time..." might allow an exemption to begin in the middle of the year with prorated taxes. Mr. Van Sant said that our Supreme Court has determined that exemptions begin on January 1. A property is either fully taxable or exempt on that date. He wanted to see further discussion of this issue. A third concern is the ability a municipality has to collect interest on deferred taxes (not exempt taxes). He suggested using an eight percent rate because that is what is used for the agriculture deferment. He added that he appreciates what Mr. Marlow is doing with the building. CHAIRMAN MACKIE noted that the House didn't do anything with Mr. Van Sant's suggestions and asked if he supported the legislation as it is currently written. MR. VAN SANT answered that the interest was not included. They discussed the beginning of the language on lines 6 and 7 and everyone agreed that an exemption did not begin in the middle of the year, but would be at the beginning of the assessment year. He said they could live with the bill the way it is currently written, however. MR. CHARLES WOHLFORTH, representing the Anchorage Assembly regarding the McKay Building, said he has tried to deal with this problem for the entire six years he has been on the Assembly. It is a real drag on the economic vitality of the east side of downtown and it was one of the reasons that area has a lot of problems. Ever since he joined the Assembly, they have been trying to get control of the building to have it torn down. They have not succeeded and Mr. Marlow came forward last year. If the building was condemned, they would still have to spend $2.4 million to tear it down and then they would have an empty lot. MR. WOHLFORTH explained that Mr. Marlow proposed giving up 10 years of taxes on a project which wouldn't exist at all without the tax exemption. It would get it off their backs, so they are not giving up that much. SENATOR KELLY asked Mr. Wohlforth the estimated worth of 10 years of taxes. MR. WOHLFORTH answered he thought it would come to around $2 million, with $1 million being paid when the building is sold. TAPE 99-5, SIDE B Number 590 SENATOR KELLY asked how much it would cost to tear the building down. MR. WOHLFORTH answered that the estimates have ranged from a low of $2.4 to a high of $3 million. CHAIRMAN MACKIE asked if he had any comments on Anchorage's liability issue. MR. WOHLFORTH replied that he hated to see anyone benefit from this situation, but pragmatically speaking, they would be getting out of the situation for a lot less money than they expected. The litigation has been going on for a long time and will continue. He didn't think those costs were recoverable. They had thought about simply paying off the owner, because it would have saved the city a lot of money. This solution is a lot more appealing than that would have been. SENATOR DONLEY asked how many years the building had been empty. MR. WOHLFORTH replied about 12 years. Mr. McKay let it run down and then it was taken over by the bank in the 1980s. SENATOR DONLEY expressed his concern for the future, now that the law is in place, would be to keep it from being used as an incentive to other folks to go out and buy large deteriorated properties and, then, essentially blackmail the city into giving them a tax break to develop them. MR. WOHLFORTH said several things make that unlikely to happen. One is that there aren't any other buildings that are comparable to the McKay Building, both in terms of the political will and desire to get rid of it and the extreme blight it imposes on the community. He also said that if you owned a deteriorated property, you would be able to use this program as much as the buyer would. He hoped people would use it if there was an opportunity to improve those properties and bring them on to the tax rolls in a positive way. SENATOR DONLEY asked if the City was attempting to recoup any of its costs from the building's former owners. MR. WOHLFORTH said that their legal department hadn't informed him. Number 542 SENATOR DONLEY asked what Mr. Wohlforth thought about a provision in the law stating if someone is selling, they couldn't make more than 100 percent profit and any excess would revert to the local government. MR. WOHLFORTH replied that he would be concerned over any change in the law that would be complex and unworkable. SENATOR DONLEY asked why the City didn't just condemn the building and then sell it to Mr. Marlow. MR. WOHLFORTH answered that the City did condemn the building and that's what the litigation was about. The problem was that typically in condemning a building, you have to show that it is dangerous or a safety hazard. This building is solid 40 or 50- year-old concrete. The ordinance that was passed in the beginning was amended to say buildings abandoned and vacant for a certain period of time could be condemned. That has to be litigated all the way to the Supreme Court to determine if that was a valid reason for condemning a property. That is what's going on now. SENATOR DONLEY asked if they would finish the appeal now that Mr. Marlow owns the building. MR. WOHLFORTH said he thought that case would no longer be pursued now that the Building Board has the issue. MR. PAT CARLSON, Kodiak Assessor, expressed concern that in small communities it might be easy for a major commercial entity to get the Assembly to buy into something like this. He wanted the structure to be there to enforce the exemption and deferral to ensure that the promises that made by property owners come true. MR. CARLSON also noted that the economic development clause in AS 29.50.50(m) requires specific eligibility requirements be stipulated in the written application process. He thought that language would be applicable to this ordinance, also. In the case of deferred taxes, they may become a lien on the property. There has been litigation in the past regarding specific language in property tax liens. There are problems because personal and real property may not be foreclosed in the same manner. The language would ensure that deferred taxes are immediately recorded as a lien on the property. SENATOR KELLY wanted Mr. Marlow to respond to the lien idea. MR. MARLOW responded that the way he sees it, this is a state statute that specifically says municipalities "may" do some things. They are not required or compelled to. Property taxes are collected and/or exempted or deferred by state law. Municipalities don't have carte blanche to do what they want with property taxes inside their domain. The Municipality of Anchorage took this tool and passed ordinances that specifically address Mr. Carlson's concerns. This bill simply gives the municipality a tool to pass an ordinance with those safeguards in it. In the Municipality of Anchorage, the ordinance specifically requires performance before the exemption and deferral kick in. With respect to the lien on the deferred portion, he didn't have the ordinance before him, but in his discussions with the municipal attorney, language was put in the ordinance that insures it's a matter of public record that the deferred property taxes is owed, so at the point of closing it can be collected. SENATOR KELLY said that one of the things they were nervous about last year was that other cities and boroughs in the state that weren't as sophisticated as Anchorage were protected. He understands that Anchorage is protected, but Mr. Carlson wants protection in statute so that all municipalities throughout the state have to protect themselves. He is always concerned about political pressure on the local level to do some type of deal for a tax exemption. He thought putting a lien on the property would be straightforward. MR. MARLOW asked if a property was normally under a lien for taxes. He didn't disagree that there should be a public record of the tax status. Number 444 MR. CARLSON commented that typically the tax authority is called to see if there are any taxes outstanding, but the recording of a lien makes things real clear, like a street assessment. CHAIRMAN MACKIE thanked Mr. Carlson for his comments and said Senator Kelly wanted to work on an amendment on this issue before it gets to the floor of the Senate. SENATOR LEMAN moved to pass CSSB54(L&C)and the accompanying fiscal note from committee with individual recommendations. There were no objections and it was so ordered. CHAIRMAN MACKIE adjourned the meeting at 2:48 p.m.